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This was upgraded by $42.2 million in the following half year to June, which the fund manager said reflected improving sentiment.

DEXUS
Property Group said property prices are near cyclical lows and markets were improving at its annual results. The group’s properties were devalued by $286 million in the first half of the financial year before being re-valued up to $50 million.

Stockland
reported its commercial property valuation rates remained steady in the second half following a revaluation of its portfolio during the financial year.

While IPD’s research found the retail property sector led the charge posting 6.5 per cent for the year to June, the firm expects the office sector to perform better than other sectors in the next year.

Mr De Francesco pointed to rising white-collar employment as a catalyst for the sector’s outperformance.

Demand, however, is still expected to vary across the different central business district markets, with IPD predicting Sydney will experience a relatively milder recovery than Melbourne.

“We do see further strengthening in the office space but it’s going to moderate and in 12 months’ time we think it’s going to softer," said Mr De Francesco.

“Even though underlying market conditions are moving in the right direction, they’re moving at a far more moderate and slower pace."

Dr Rees said property valuations would not rise significantly following the recent revaluations. “We don’t expect huge surges in values, we see this as being a slow and steady recovery," he said.

IPD also found capitalisation rates had risen on the back of better market fundamentals and unfavourable capital market conditions. Yet Mr De Francesco said this trend would steady in the next six months.

Office property capitalisation rates fell during the bull market but gradually rose to more than 8.5 per cent in the June quarter. It’s a similar story for the retail and industrial property sector, which posted 7 per cent and 7.6 per cent capitalisation rates at the end of the June quarter.